December palladium
US:PAZ7
climbed by $21.70, or 2.2%, to settle at $1,015.80 an ounce on Comex. That was the highest settlement for a most-active palladium contract since February 2001, according to FactSet data. Prices had hit highs at or above the key $1,000 level four times out of the previous five sessions. It also topped $1,000 on an intraday basis in mid-October.

For 2017, world automotive demand for palladium is forecast to exceed 8 million ounces for the first time, and the market’s supply deficit is expected to “widen significantly” to 792,000 ounces, according to a report from Johnson Matthey released in May of this year.

Palladium is used in the pollution-control catalytic converters of gasoline-powered vehicles. Platinum, its sister metal,
US:PLF8
which rose 1.4%, to settle at a more than three-week high of $937.90 an ounce Wednesday, is primarily used in diesel-powered vehicles.

Long term for palladium, it all “goes back to the production of vehicles and catalytic converters, specifically,” said Adam Koos, president of Libertas Wealth Management Group.

“Some of the recent growth is likely due to the surge of automobile purchasing in places like China,” he said. But also, more recently and “thanks to a couple hurricanes this year, drivers in the South have taken their insurance claims from destroyed vehicles and have purchased new ones, driving demand higher for production.”

ETF Securities’ Gold, meanwhile, also pointed out that demand for palladium is “most sensitive to the industrial production cycle,” so it may “see further support along with industrial metals in anticipation of a rise in U.S. infrastructure spending and recovery in global growth.”

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